Alpesh Patel's NEWSLETTERPRO – Majors currency pairs poised to build momentum as important data come in, will Euro and Pound stand their ground?

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MORNING BRIEF

Yesterday was a quiet start for the week ahead of us as currency markets remained overall unchanged. The US Dollar retraced a bit lower against the Euro and the Pound on better than expected second tier data releases. Growth in Germany came out a bit stronger than previously eyed and this drove the Euro near 1.3520 before settling there for the rest of the day. The Pound, on the other hand, had a slightly bigger rise as the PMI Construction Index came at 59.4, the highest level in 6 years lifting the Pound at 1.5980. The more important events of the week however lie in front of us and today we should pay attention to the British PMI Services Index and the ISM-Non Manufacturing Composite as both the UK and the US economies are service-based and these indicators will provide a much more accurate picture on what’s going on in the domestic economies. Tomorrow, the ECB Rate Decision is scheduled and the tone that Mario Draghi will use for his statement after the release could offer us some insight on his views over the European economy. European policymakers have shared their doubts over the recovery in the region and suggested that another stimulus round might be needed next year after the current LTRO program expires and we’re anxious to see whether the ECB President shares their views or appears more optimistic over Europe’s outlook.

Service sectors’ reports from the US and the UK to provide useful insight

As we mentioned above, today our attention will be focused on the release of the UK PMI Services report and the US ISM Non-Manufacturing data. The former one, coming at 9.30 UK time will provide us with important information on the UK economy that has shown some discouraging figures over the previous month. The Construction data yesterday offered support to the Sterling but a disappointing Services report today could drive the Pound lower again. Later in the day, the ISM Non-Manufacturing component will also serve as good information on the US economy that is a service-based economy as well. A possible acceleration in the services’ sector will lift the Dollar and put pressure again on the high-beta currencies like the Euro and the Pound.

Economic Calendar

Time

Currency

Event

Importance

Forecast

Previous

09.30

GBP

British PMI Services

Medium

60.0

60.3

15.00

USD

ISM Non-Manufacturing

High

54.0

54.4

 

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TECHNICAL ANALYSIS & LEVELS

EUR/USD

Euro remained generally unchanged yesterday hovering around the 1.3500 mark forming a sideways move. The exit from this formation will provide us with a trading opportunity thus we would  favor a long entry above the 1.3525 level with targets coming at the 1.3545 and 1.3585 levels, our stop should be placed below the 1.3475 support level. On the other hand, a downwards breach of the 1.3475 support line will trigger a short entry for us with targets laying at the 1.3455 and 1.3415 price tags and our stop needs to be placed above the 1.3525 level. The Euro hasn’t retraced as high as we would want and these trades are short-term focused attempts to capture a few quick pips and get out as the pair’s technical outlook is not completely clear at this point.

GBP/USD

The Pound regained some lost ground yesterday on the better than expected Construction data release. The UK currency is now hovering near the 1.5980 mark and a move higher might provide a good trading opportunity for us. Should the pair clear above the 1.5980 level a quick short entry is advised, targets will be set at the 1.6000 and 1.6050 levels and a stop needs to be placed just below the 1.5935 level. Today’s PMI Services report might provide the necessary lift for the Pound to climb back above the 1.6000 mark and this would work in our favor. A short trade is not advised at this level as we would only think of shorting the Pound if it breached below the 1.5900 support level.

FTSE 100

The FTSE 100 moved in our favor yesterday climbing higher to reach our first target at the 6,785 points level. Now we need to move our stop at the breakeven price or better yet a few points below that, at the 6,750 points level to avoid excess losses on a retracement. We feel that the UK index still has the momentum to reach even higher and the 6,830 points level is our second target. We need to remain patient and let the uptrend carry us higher towards more profits.

Gold

Gold remained range-bound yesterday hovering around the $1,315 price tag. For today we will move our stops a bit lower to lock in some additional profit and we would like to place them at the $1,325 price tag as this level seems to be established as a near-term resistance for the yellow metal. Our second target at the $1,278 level remains unchanged and we could see some momentum building up today if the ISM report comes out strong for the Dollar and drags Gold’s price lower.

All charts have been created using FXCM’s Trading Station platform.

This is the free, time-delayed version of NewsletterPro, a subscription-based product.

If you would like to receive it before 7:30am, please subscribe by clicking here.

 

 

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